Always Fade The Paper

Friend of the blog Ivan Krastins was slumming it again in our comment section lately, and although sometimes cryptic in nature we always appreciate his contributions. As you may recall our CrazyIvan strategy was named in homage of the candle pattern systems he developed over the past decades. Now Ivan’s general sentiment on the Monday’s shake out was simple and straight forward as usual: ‘Fade the paper‘.

Yes, yes – nothing new to see here – you’ve all heard that one before, right? Yes, but unlike us silly retail muppets, who now have access to a myriad of trading books, financial blogs, and sophisticated tools online, it was a lesson he and his peers learned the hard way. You know back in the days down in the mirky depths of the futures pits. Things often got pretty ugly and we retail chumps probably would have lasted less than a day, if that.

Well, those times are long gone and he’s since migrated to trading on a beach on the lovely South Pacific island of Vanuatu. I’m not kidding by the way – he’s literally placing trades right now via some 256kb DSL line while an army of crabs is encroaching on his straw hut and the sun is setting behind the ocean. Probably still charting on paper and such. A relic of the past perhaps but what’s important is that he keeps winning. Sophisticated tools and charts don’t make you a good trader – it’s that thing between your ears and perhaps some body parts further South.

Of course what has NOT changed is that of human nature – and as such the game remains the same. In yesterday’s morning briefing I encouraged you to ignore the headlines and instead focus on our charts. Now let’s see how that worked out for us:

Not so shabby actually – you may recall our Hammer Long from last night. Although things jumped earlier today you should have had your entry set at 1849.5 and gotten filled anywhere between 1850 and 1851 (depending on how lousy your broker is). And if you didn’t get your limit filled there you would have had another chance near 1852.5 or 1853 an hour later. Either way we are up about an R and I just got stopped out as I set it at 1861. That’s about 0.7 real R given my fill at 1852.5.

Short term I’m interested in the USD/JPY here – I want to be long above 101.9 but until that happens I’m in a short position with a stop at my long trigger.


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Cheers,

The Zombie Apocalypse Is Near!

Of course the MSM is all up in arms about ‘evil’ Russia deploying troops in Crimea (it’s in Southern Ukraine – a peninsula of Ukraine located on the northern coast of the Black Sea). And the usual suspects are spinning at max hype velocity fully expecting all this to trigger WW3. I guess I better start stacking up on beans and bullets. Oh wait – my arsenal is all packed in long term storage over in Los Angeles – bugger!

Look guys – I tell you exactly what’s going to happen. Absolutely f..ing nothing. Like all other real or manufactured crises of recent past this is going to blow over eventually. Despite all the bellicose rhetoric neither the Russians or the West have any interest in escalating this conflict beyond the region. Of course I have no idea how it’s going to resolve and whether Putin will eventually cede control of Crimea after securing Russia’s interest. But unless you are Ukrainian or Russian, honestly, do you really care? Is this going to affect your life, your investments, or your trades? I mean going forward? Really? So why should you care?

If there is any damage then it has already been done. Obviously our long campaign on the equities side has been taken to the woodshed. But that’s ancient history – what we care about is what lays ahead. However there is no predicting how all this will play out and thus I recommend you fade the paper and instead stick with the charts, as usual. Don’t get caught in this week’s hype – stick with what works and don’t let the news lead you to become biased. Because that leads to the express elevator to the woodshed. By the way, if you want the skinny on this train wreck then head over here.

I already mentioned that the long campaign has been stopped out – last night I was actually pretty lucky hitting a bid two ticks below break/even at ES 1844. Since then equities have further degraded – the E-Mini is now trading below a new daily NLSL at 1838. If we close below it then we may revisit the 25-day or the 100-day – but as you can see they are both swinging up now and unless we fall off the plate I expect on of them to act as support.

During uncertain and headline sensitive times like these I usually switch into survival mode. Until further notice trading now becomes an exercise of asset protection and damage mitigation. Which means I am extra picky about setups, my position sizing drops to below 0.5R, and I make extra sure that there is little correlation risk. In other words hunkering down, waiting out the storm, and live to fend another day.

A bit more below the fold for my intrepid subs:


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Cheers,

Only The Paranoid Mole Survives

The bounce I expected earlier this morning finally materialized but not before grazing my new stop which I had advanced to 1840.25. Bugger! I didn’t even get to take the 25% profits yesterday as I was off the 1.2R mark by a tick or two. Well, that happens – it’s just one out of 10,000 as we say.

So you may wonder about today’s theme and I’ll explain it to you via the Zero chart shown above. As you can see the current bounce higher is not accompanied by a meaningful signal (see the flatline on the Zero Lite). This usually means that participation is rather thin and that the current push higher may be a trap. You know – just because we’re paranoid doesn’t mean they are not out to get us – believe me, they very much are. So the next question in our mind should be – how can we take advantage of this?

Fortunately today’s tape is producing what I was hoping for yesterday already – an inside day candle. Which means we now have a trigger to the up and down side. It’s a decent range which should keep us from getting whipsawed tomorrow (so goes the theory – cough cough).

Here’s the same on the NQ – it was even painting a doji as I took this snapshot – if we close this way it would support the concept of indecision. Anyway, unless we paint a big move in the next two hours the triggers are as shown on the chart. Again, if you are new here then check our cheat sheet for the rules.

Another juicy inside day candle on the AUD/CAD – it also happens to be in an Retest Variation Short configuration. I would however prefer a long breach here – trading with the trend is so much more rewarding.

More setups below the fold – please grab your decoder rings:


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Cheers,





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